BioScrip Reports Fourth Quarter and Full Year 2017 Financial Results

March 08, 2018 08:00 AM Eastern Standard Time

DENVER--(BUSINESS WIRE)--BioScrip, Inc. (NASDAQ: BIOS) ("BioScrip" or the "Company"), the largest
independent national provider of infusion and home care management
solutions, today announced its preliminary 2017 financial results and
provided financial guidance for 2018, subject to the completion of the
Company’s accounting review described below.

4Q 2017 Preliminary Highlights

Net revenue of $182.6 million, including core product mix of 75.7%,
compared to 69.6% in the prior year quarter

Net loss from continuing operations of $1.2 million, compared to $5.2
million in the prior year quarter

Adjusted EBITDA of $16.8 million, 77% above the prior year quarter,
driven by a 740 basis point improvement in gross profit margin and a
$11.6 million reduction in operating expenses

Operating cash flow of $10.1 million, reflecting $15.2 million of
operational and working capital improvements over the prior year
quarter, and $6.9 million of interest payments

Liquidity of $49.5 million at December 31, 2017, consisting of $39.5
million of cash and equivalents and $10.0 million of senior credit
facility availability, compared to $9.6 million of total liquidity at
December 31, 2016

2017 Preliminary Highlights

Net revenue of $817.2 million, including core product mix of 73.8%,
compared to 63.3% in the prior year

Net loss from continuing operations of $61.3 million, compared to
$34.4 million in the prior year

Adjusted EBITDA of $45.0 million, 45% above the prior year, driven by
a 480 basis point improvement in gross profit margin and a $10.3
million reduction in operating expenses

Operating cash flow of $5.8 million, reflecting $51.6 million of
operational and working capital improvements over the prior year, and
$45.4 million of interest payments

“BioScrip concluded 2017 with strong fourth quarter financial results,
delivering significant year-over-year increases in core revenue mix,
gross profit margin, adjusted EBITDA and cash provided by operating
activities. Our fourth quarter adjusted EBITDA of $16.8 million, a
record amount, indicates our turnaround plan is working,” said Daniel E.
Greenleaf, President and Chief Executive Officer. “The initiatives we
launched in 2017 are producing strong results and continuing to build
momentum. We look forward to more progress in 2018, growing our core
business and expanding our profitability, while making select
investments in people, technology, and infrastructure setting up
BioScrip to have a break out year in 2019. Our expectation for 2019 is
to deliver a minimum of $75 million of Adjusted EBITDA, resulting from
core revenue growth at or above market rates and continued gross margin
expansion and operating expense leverage, coupled with the benefit of
the Cures Fix. As the only independent national home infusion pure play,
we are uniquely positioned to benefit as patient care increasingly
migrates from higher-cost institutional settings to the home, where
better outcomes are also achieved."

Financial Guidance

For full year 2018, the Company is establishing revenue guidance of $710
million to $720 million and adjusted EBITDA guidance of $54 million to
$58 million. The Company expects to incur restructuring expenses of
between $5 million and $6 million in 2018, primarily reflecting costs
related to redesigning and optimizing its revenue cycle management
process. The Company expects capital expenditures in 2018 to be between
$12 million and $14 million, reflecting continued maintenance capital
expenditures as well anticipated investments in select branches to
support growth.

The above guidance does not reflect the adoption of ASC 606, a new
revenue accounting standard to be adopted in the first quarter of 2018,
that requires certain bad debt expenses to be reclassified as a
deduction to revenue. The adoption of ASC 606 is not expected to impact
the Company’s reported operating income or adjusted EBITDA. The Company
expects that, as a result of adopting ASC 606, that a majority of its
bad debt expense will be reclassified as a deduction to revenue. The
Company will provide updated revenue guidance to reflect the adoption of
ASC 606 when it releases its first quarter 2018 financial results.

Company’s Internal Accounting Review

As a result of the detailed review of the Company’s financial statements
performed by the Company’s CFO and interim-CAO during the preparation of
the Company’s financial statements for the full year 2017, the Company
identified internal control deficiencies in connection with account
reconciliations for certain asset and liability accounts. The potential
financial statement errors discovered to date resulting from these
internal control deficiencies do not appear to be material, but the
review is ongoing. The Company, along with its external auditors,
continues to review the possible errors and, if required, will reflect
any necessary revisions and may report one or more internal control
material weaknesses in its upcoming Form 10-K filing. Depending on the
timing of the completion of this review, the Company may need to delay
the filing of the Form 10-K.

Separately, the Company has identified and will report a material
weakness related to certain spreadsheets used to calculate periodic
adjustments to accounts that do not impact Adjusted EBITDA, including
amortization of intangible assets, equity-linked liabilities and the
amortization of discounts and deferred issuance costs of debt. The
material weakness did not have any effect on the Company’s 2017
financial statements.

Conference Call and Presentation

BioScrip will host a conference call and live webcast on March 8, 2018,
at 9:00 a.m. Eastern Time, to discuss its fourth quarter and full year
2017 financial results. Interested parties may participate by dialing
877-423-9820 (US) or by accessing a link under the "Investors" section
on the Company's website at www.bioscrip.com.

An audio webcast and archive will be available within two hours of the
call’s completion under the “Investors" section of the Company's website.

About BioScrip, Inc.

BioScrip, Inc. is the largest independent national provider of infusion
and home care management solutions, with approximately 2,200 teammates
and nearly 80 service locations across the U.S. BioScrip partners with
physicians, hospital systems, payors, pharmaceutical manufacturers and
skilled nursing facilities to provide patients access to post-acute care
services. BioScrip operates with a commitment to bring customer-focused
pharmacy and related healthcare infusion therapy services into the home
or alternate-site setting. By collaborating with the full spectrum of
healthcare professionals and the patient, BioScrip provides
cost-effective care that is driven by clinical excellence, customer
service, and values that promote positive outcomes and an enhanced
quality of life for those it serves.

Forward-Looking Statements – Safe Harbor

This press release includes statements that may constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including the statements
regarding 2017 guidance, projections of certain measures of the
Company's results of operations, projections of future levels of certain
charges and expenses, expectations of Home Solutions cost synergies and
incremental cost structure improvements and other statements regarding
the Company's financial improvement plan and strategy and anticipated
effects of the Cures Act and the UnitedHealthcare contract. You can
identify these statements by the fact that they do not relate strictly
to historical or current facts. In some cases, forward-looking
statements can be identified by words such as "may," "should," "could,"
"anticipate," "estimate," "expect," "project," "outlook," "aim,"
"intend," "plan," "believe," "predict," "potential," "continue" or
comparable terms. Because such statements inherently involve risks and
uncertainties, actual future results may differ materially from those
expressed or implied by such forward-looking statements. Investors are
cautioned that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ materially from those in the forward-looking
statements as a result of various factors. Important factors that could
cause actual results to differ materially from those in the
forward-looking statement include but are not limited to risks
associated with: the Company’s ability to make principal and interest
payments on our debt and unsecured notes and satisfy the other covenants
contained in its debt agreements; the Company’s ability to grow its core
Infusion revenues; the Company's ability to continue to execute its
financial improvement plan to reduce operating costs and focus its
business on its Infusion Services segment; the Company’s ability to
evaluate opportunities for improvement and implement solutions as part
of its strategic review process; the success of the Company’s
initiatives to mitigate the impact of the Cures Act on its business;
reductions in federal, state and commercial reimbursement for the
Company's products and services; increased government regulation related
to the health care and insurance industries; as well as the risks
described in the Company's periodic filings with the Securities and
Exchange Commission. The Company does not undertake any duty to update
these forward-looking statements after the date hereof, even though the
Company's situation may change in the future. All of the forward-looking
statements herein are qualified by these cautionary statements.

Note Regarding Use of Non-GAAP Financial
Measures

In addition to reporting financial information in accordance with
generally accepted accounting principles (GAAP), the Company is also
reporting Adjusted EBITDA, which is a non-GAAP financial measure.
Adjusted EBITDA is not a measurement of financial performance under GAAP
and should not be used in isolation or as a substitute or alternative to
net income, operating income or any other performance measure derived in
accordance with GAAP, or as a substitute or alternative to cash flow
from operating activities or a measure of the Company’s liquidity. In
addition, the Company's definition of Adjusted EBITDA may not be
comparable to similarly titled non-GAAP financial measures reported by
other companies. Adjusted EBITDA, as defined by the Company, represents
net income before net interest expense, income tax expense, depreciation
and amortization, impairment of goodwill, stock-based compensation
expense, and restructuring, integration and other expenses. As part of
restructuring, the Company may incur significant charges such as the
write down of certain long−lived assets, temporary redundant expenses,
retraining expenses, potential cash bonus payments and potential
accelerated payments or terminated costs for certain of its contractual
obligations. Management believes that Adjusted EBITDA provides useful
supplemental information regarding the performance of BioScrip’s
business operations and facilitates comparisons to the Company’s
historical operating results. For a full reconciliation of Adjusted
EBITDA to the most comparable GAAP financial measure, please see the
attachment to this earnings release.

Schedule 1

BIOSCRIP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except for share amounts)

(unaudited)

December 31,

2017

2016

ASSETS

Current assets

Cash and cash equivalents

$

39,457

$

9,569

Restricted cash

4,950

-

Receivables, less allowance for doubtful accounts of $37,912 and
$44,730

127,634,012 and 117,682,543 shares issued and outstanding as of
December 31, 2017 and 2016, respectively

13

12

Treasury stock, 5,106 shares outstanding, at cost as of December 31,
2017 and no shares

outstanding as of December 31, 2016.

(16)

-

Additional paid-in capital

624,924

611,844

Accumulated deficit

(706,024)

(643,419)

Total stockholders' deficit

(81,103)

(31,563)

Total liabilities and stockholders' deficit

$

605,883

$

607,740

Schedule 2

BIOSCRIP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Years Ended December 31,

2017

2016

Net revenue

$

817,190

$

935,589

Cost of revenue (excluding depreciation expense)

545,859

669,958

Gross profit

271,331

265,631

% of revenues

33.2%

28.4%

Other operating expenses

163,621

170,718

Bad debt expense

24,107

26,799

General and administrative expenses

40,940

39,225

Change in fair value of equity linked liabilities

2,795

(10,450)

Restructuring, acquisition, integration, and other expenses, net

12,356

15,859

Depreciation and amortization expense

26,306

21,551

Interest expense

52,357

38,235

Loss on extinguishment of debt

13,453

-

Loss (gain) on dispositions

581

(3,954)

Loss from continuing operations, before income taxes

(65,185)

(32,352)

Income tax benefit (expense)

3,900

(2,015)

Loss from continuing operations, net of income taxes

(61,285)

(34,367)

Loss from discontinued operations, net of income taxes

(1,320)

(7,139)

Net loss

$

(62,605)

$

(41,506)

Accrued dividends on preferred stock

(9,376)

(8,392)

Deemed dividend on preferred stock

(701)

(692)

Loss attributable to common stockholders

$

(72,682)

$

(50,590)

Denominator - Basic and Diluted:

Weighted average number of common shares outstanding

123,791

93,740

Loss from continuing operations, basic and diluted

$

(0.58)

$

(0.46)

Income from discontinued operations, basic and diluted

(0.01)

(0.08)

Loss per common share, basic and diluted

$

(0.59)

$

(0.54)

Schedule 3

BIOSCRIP, INC. AND SUBSIDIARIES

QUARTERLY RECONCILIATION BETWEEN GAAP AND NON-GAAP MEASURES

(in thousands)

Three Months Ended

Twelve Months Ended

3/31/2017

6/30/2017

9/30/2017

12/31/2017

12/31/2017

Loss from continuing operations, net of income taxes

(18,991)

(28,695)

(12,404)

(1,195)

(61,285)

Interest expense

(12,744)

(12,715)

(13,175)

(13,723)

(52,357)

Loss on extinguishment of debt

-

(13,453)

-

-

(13,453)

(Loss) gain on dispositions

-

(685)

33

71

(581)

Income tax benefit (expense)

(619)

(718)

(60)

5,297

3,900

Depreciation and amortization expense

(6,988)

(6,789)

(6,552)

(5,977)

(26,306)

Stock-based compensation expense

(594)

(433)

(545)

(788)

(2,360)

Change in fair value of equity linked liabilities

-

-

(1,080)

(1,715)

(2,795)

Restructuring, acquisition, integration, and other expenses, net (1)

(3,223)

(3,911)

(4,037)

(1,185)

(12,356)

Consolidated Adjusted EBITDA

$

5,177

$

10,009

$

13,012

$

16,825

$

45,023

(1) Restructuring, acquisition, integration and other
expenses, net include costs associated with restructuring,
acquisition, and integration initiatives such as employee severance
costs, certain legal and professional fees, redundant wage costs,
impacts recorded from the change in contingent consideration
obligations, and other costs related to contract terminations and
closed locations.

Schedule 4

BIOSCRIP, INC. AND SUBSIDIARIES

QUARTERLY RECONCILIATION BETWEEN GAAP AND NON-GAAP MEASURES

(in thousands)

Three Months Ended

Twelve Months Ended

3/31/2016

6/30/2016

9/30/2016

12/31/2016

12/31/2016

Loss from continuing operations, net of income taxes

(9,770)

(8,309)

(11,090)

(5,198)

(34,367)

Interest expense

(9,412)

(9,469)

(9,331)

(10,023)

(38,235)

(Loss) gain on dispositions

939

-

3,015

-

3,954

Income tax benefit (expense)

(23)

(149)

(421)

(1,422)

(2,015)

Depreciation and amortization expense

(4,538)

(4,252)

(4,166)

(8,595)

(21,551)

Stock-based compensation expense

(1,474)

(519)

(1,358)

1,388

(1,963)

Change in fair value of equity linked liabilities

-

-

-

10,450

10,450

Restructuring, acquisition, integration, and other expenses, net (1)

(2,667)

(4,291)

(2,368)

(6,533)

(15,859)

Consolidated Adjusted EBITDA

$

7,405

$

10,371

$

3,539

$

9,537

$

30,852

(1) Restructuring, acquisition, integration and other
expenses, net include costs associated with restructuring,
acquisition, and integration initiatives such as employee severance
costs, certain legal and professional fees, redundant wage costs,
impacts recorded from the change in contingent consideration
obligations, and other costs related to contract terminations and
closed locations.